Things to Focus Before Starting A Small Business in Dubai

by Zaara 07, Feb 2020

Things to Focus Before Starting A Small Business in Dubai

There are many types of business models on offer by the Dubai government, for the foreign investors to explore, such as direct sales, commercial agency arrangements, branch or representative office, Limited Liability Company and first free zone investment.

Dubai has a world-class business infrastructure and attracts world-class talent, being a free trade zone; company registration provides foreign businesses with complete ownership and management of their companies. Due to Dubai’s successful lifestyle and fast-paced corporate structure, company formation is a great opportunity here.

Styles of Business Structures

Three different forms of business structures are on offer for the companies to establish their businesses, by the UAE:

Free-Zone

As per information obtained in the website of Dubai’s Multi Commodities Centre, a free zone or a free trade zone is a nominated area, where the taxes and restrictions are not applicable on businesses, employment or trade, the way they are suitable in other parts of the country.

In the free zone, without the intervention of authorities, goods can be handled, landed, manufactured, reconfigured, and re-exported. The products are subject to customs duties only when they are moved to consumers within the country.

Free zones are usually organized around seaports, airports and areas with advantage for trade.

On-shore

These companies trade locally in the UAE market and globally as well. Various types of on-shore companies exist which can be incorporated; they need a UAE national, who would act as a local sponsor, or a local service agent, depending on the type of the company.

Off-shore

These are companies which are entirely owned by expatriates. They are used as assets, international trade, properties, or holding companies for businesses existing inside and out of the UAE. This structure works well for companies willing to do business globally. They can only be contacted outside of UAE, not inside. 

Get started with setting up a business

For the local business

You have to select a local sponsor, somebody who is a UAE national, for your local market.

To exploit the potential of Dubai and the business opportunities it provides, you must have a locally registered LLC business. The UAE national should be taken as a 51% partner. The advantages being, you can set up your business anywhere in the city, this gives you a significant power by location.

For business at Free zone

If you wish to be the 100% owner of your business, you have to locate your business in one of the available free zones. This is impractical for the company that directly deals with people, like convenience stores and restaurant chains. The rental might be quite high, but the advantages are enormous.

  • You get 100% ownership of your business.
  • Your startup process is fast-paced.
  • You have duty free customs boundary.

The third step would be to select a location that optimizes your convenience and costs. You need to find yourself in an area that is most profitable for your business, hugely depending on the product or type of trade that you are engaging yourself with.

If your business is set up in a free zone, you should take into consideration your trade, business model, and product before selecting the area, based on the distance and costs suitable to your business.

The next step is confirming if your Visa is eligible or not, for you and your employees to stay in Dubai and run the business. For most cases, Visas are suitable for almost all the market, the only thing that varies is their criteria based on your office size, type of your business and employees/investors.

If your business is a local company in Dubai, you need to work with your sponsor to obtain the Visa.

The final step would be to recruit a registered agent to help you guide the way for establishing a business startup. These consultants will help you through every step of the process, along with registering the company for you. They even help with the opening of the bank accounts, arrange for auditors and take care of your renewals and help with other services.

Their expertise will help you in dealing with the Free zone authorities and the local government bureaucracy, in planning and deciding your business costs.

They also come up with experts who can provide strategies for you to set up your business, recognize potential costs, take care of your licensing and location, and even get you through your business hurdles.

Some of the initial costs (approximately) to set up a free zone company, from data obtained as of Q2, 2019 are:

1. Rent on Office Space (yearly or termly cost): AED 15,000+

The cost varies depending on the free one. Depending on the number of employees your business is employing, and the number of visas that it can obtain, your options will be opened.

There shall also be an additional service charge which will be calculated on your rent.

2. License for Free Zone (Yearly): AED 10000 – AED 50000

This fee is applicable on all trading, service, and industrial companies. The free zone that you choose is the one that does the licensing.

3. Registration fees for Free Zone (one time): AED 5000 – AED 45000

This is for your company to be registered, it is paid to the free zone authority. The cost of-course varies with the Free Zone and type of company that you choose.

4. Free Zone Visa (yearly cost + renewal): AED 3000 – AED 5000 per Visa

There is a limited number of visas allowed for the Free Zone companies, depending on the office space you rent. The fees vary for employees staying in UAE and those who are coming from abroad.

5. Bank Guarantee (yearly)

All the Free Zone companies need to show an amount of guarantee for each of their employees, for example, it could be 60 days of salary with a one-way ticket to their home country.

6. Agent Registration Fee (one time + renewal)

You would require an agent to help you with the setup of the company and all the process. So you’ll need a local agent who will mandate all the government procedures.

Some of the other miscellaneous costs are:

  • Initial Approval
  • Trade Name: AED 500 – 1000
  • MOA: AED 1000 – 2000

Creating a good marketing strategy and knowing your brand will help you in the long term. We at Commitbiz help the business to set up by integrating all professional materials. Our experts will guide you on which strategies to go for and create authenticity in work. Our goal is to be consistent while the growth stage and in future as well. Contact us today!